College Financing Basics

To apply for federal financial aid to pay for college, you must complete a Free Application for Federal Student Aid (FAFSA). The application is free and only needs to be completed once a year. You can use an abbreviated form to reapply for financial aid the following year.

Since the FAFSA is also used by non-federal financial aid sources, the U.S. Department of Education encourages you to complete one even if you do not seek federal financial aid.

The following general requirements exist to determine eligibility to receive federal financial aid. The applicant must:

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You do not have to demonstrate financial need to receive an unsubsidized Stafford loan, PLUS loan or federal consolidation loan.

Financial need is the difference between the student's total expected cost of college and amount the applicant is expected to contribute. The contribution amount is calculated using a worksheet and is called the expected family contribution (EFC).

For example, if the total expected cost of college is $60,000 and your expected family contribution is $35,000, you are eligible to receive up to $25,000 in financial aid other than unsubsidized loans. Your school's office of financial aid may have some latitude in adjusting the expected cost of college or the data used to calculate your EFC.

Financial aid applicants fall into one of three categories.

Dependent students. For students who are claimed as a dependent on someone else's income tax return, the EFC formula is based on assets and income of parents and student.

For the 2005-2006 financial aid year, 12% of the parents' adjusted assets and 100% of adjusted income are included in the EFC calculation to determine their potential contribution. For the child, 35% of his or her adjusted assets and 50% of adjusted income are used in the calculation.

Independent student with no dependent(s) other than a spouse. The expected contribution is based on the married couple's combined assets and income. For the 2005-2006 financial aid year, 35% of adjusted assets and 50% of adjusted income are used to determine the potential contribution.

Independent student with dependent(s) other than a spouse. The expected contribution is based on the married couple's combined assets and income. For the 2005-2006 financial aid year, 12% of adjusted assets and 100% of adjusted income are used to determine the potential contribution.

You may wish to refer to the worksheet used by financial-aid officials at the DOE's Office of Student Financial Assistance to calculate your EFC for the 2005-2006 financial aid year.